Scarce labor is warping our economy, but it could be good in the long run

We’re living through an existential shift in our collective thinking about what constitutes making a living.

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Hotels and restaurants. Railroads. Retail stores. Nonprofits. Hospitals. The MBTA. Police departments. Schools. Construction companies. Delivery services. Day care centers.

Many kinds of organizations have been desperate for workers for two years, and there’s no indication that the situation will change soon. The federal government counted 11 million job openings in December, an increase of 600,000 from the previous month, and the percentage of Americans looking for work is the lowest it’s been in 54 years.

This phenomenon has contributed to inflation by raising the cost of labor and inhibiting the supply of goods. It’s forcing small businesses to close and keeping new enterprises from getting off the ground. It’s requiring people to wait longer to be seen in emergency rooms, and it’s making it very difficult to get a plumber. The problem also perpetuates itself. If affordable child care or senior care isn’t available, many people can’t go to work themselves.

This special issue of Globe Ideas illuminates the situation from several perspectives: why it’s happening, what might be done about it, and what’s being lost and gained along the way. We’ve asked people with a variety of experiences to contribute their views, including a chef who made an agonizing decision about his restaurant, a nurse who left the hospital and isn’t looking back, and an HVAC repairman flirting with retirement.

Stories such as theirs reveal that what’s going on is not entirely quantifiable; it runs deeper than what economics or demography can explain. We’re living through an existential shift in how people think about work and where it fits into the other things that give our lives meaning. And though this transition is particularly wrenching in some sectors, there might be a kernel of good news: Labor scarcity could give workers more power, which in turn could help spread prosperity more widely.

COVID obviously is the cause of a lot of this. In November, Federal Reserve Chairman Jerome Powell said the US labor force had 3.5 million fewer workers than the Congressional Budget Office had forecast before the pandemic. He said that about 2 million of those missing workers were among the unusually high number of people who retired after the pandemic began. The rest he attributed to declines in legal immigration and COVID deaths in the working-age population. (Immigration began falling in 2016 but appears to be rebounding now.) Meanwhile, long COVID symptoms are keeping substantial numbers of other people from returning to work full-time or at all.

Overall, the percentage of Americans who are working or looking for work remains about a point lower than it was in February 2020 — even though COVID stimulus checks from the government have dried up and eager employers have raised wages and offered hiring bonuses.

Brian Bethune, an economist at Boston College, argues that employers in retail, health care, and other customer-facing industries still have not boosted pay high enough to account for the COVID-era risks and difficulties of dealing with members of the public. “We haven’t woken up yet to the new reality of the employment markets,” he says.

But focusing too much on COVID obscures what it will take to resolve the labor shortages, because much of what we’re experiencing predates the pandemic.

Labor force participation in the United States peaked in 2000, the year the oldest Baby Boomers turned 54. And on top of the wave of Boomer retirements, millions of men between the ages of 25 and 54 gave up on employment in the aftermath of the Great Recession of 2007-09. About 14 percent of American men in those prime years are not working today. As Nicholas Eberstadt of the American Enterprise Institute points out, that’s slightly worse than the comparable figure from 1940, at the end of the Great Depression.

Researchers have documented multiple causes for men’s disconnection from work, such as the decimation of manufacturing and changing expectations around gender roles. But whatever the reasons, Eberstadt has shown that the average man in this situation tends to get by with government disability payments and/or help from friends, relatives, and the women in his life — usually enough to eke out what would have once been considered a “working-class” existence.

That suggests that raising the pay for low- and medium-level service jobs may not be enough to lure significant numbers of disengaged people back to the workforce.

And that means the labor shortages will need multiple solutions, like allowing more immigrants to work and galvanizing vocational education to create more connections to good blue-collar jobs. Also, in a country where 8 percent of the adult population has been convicted of a felony, reducing barriers to employment for people with criminal records would be in everyone’s economic interest.

It’s intriguing that while many potential workers are on the sidelines, a lot of people who are employed are nonetheless yearning for big changes in their working lives. Witness the rise of “quiet quitting” — doing only the minimum that’s required — plus a renewal of union organizing, demands for more flexibility, and the popularity of self-directed gig work.

What if all this is a cause for optimism? Maybe the combination of labor scarcity and restive employees will provoke employers to think more creatively about how to make jobs more appealing — not only more lucrative but also more fulfilling and less like interchangeable parts.

The possibilities ought to be endless. There is no shortage of big problems to solve. And work of some form is good for us; it’s fundamentally about being useful to other people. People need to work, and not merely in the clinical economic sense that their income taxes are required to support those who can’t support themselves. Work reduces our atomization and can enrich our sense of purpose — a quality that people cried out for in the pandemic.